Walmart eyes African expansion with Massmart deal

September 27, 2010

Walmart and Africa’s leading retailer Massmart Holdings Limited are in talks that could lead to a $4.4 billion deal, the companies announced early Monday. The nonbinding proposal outlined by the companies envisions an all cash deal in which Walmart would pay 148 South African Rand, or roughly $21 per share, to acquire Massmart’s outstanding shares.

If successful, the deal would immediately give Walmart a substantial presence in Africa as Massmart is a dominant wholesaler and retailer based in Johannesburg. At the end of its fiscal year June 27 the company operated 256 stores, 232 of which are located in South Africa with 24 additional units spread across 13 other Sub-Saharan countries. Total sales last year were approximately $6.7 billion.

“We are at the beginning of the process, and it is difficult to say how long it will take or whether it will lead to an offer. The immediate next steps will be a confirmatory due diligence exercise, where after regulatory and shareholder approvals will be sought,” the company said in a prepared statement.

Walmart International president and CEO Doug McMillon said an acquisition of Massmart fits with the company’s overall strategic objectives of saving people money so they can live better.

“We believe this proposed acquisition is a great opportunity to deliver on that mission for all the people in the regions of the African continent where Massmart currently operates,” McMillon said. “We have the opportunity to leverage our experience from around the world to more effectively serve customers, create opportunities for our associates and add shareholder value.”

The Massmart Group consists of nine wholesale and retail chains and one buying group operating under the names, Game, Dion Wired, Makro, Builders Warehouse, Builders Express, Builders Trade Depot, CBW, Jumbo Cash and Carry and the Shield buying group.

Responsibility for the region currently lies with Andy Bond, chairman of the executive committee at Walmart’s Asda subsidiary in the United Kingdom. He said, “South Africa represents a compelling growth opportunity for Walmart and offers a platform for growth and expansion in African countries.”

Bond stepped down as president and CEO of Asda this past May and was replaced in that role by former Asda COO Andy Clarke.

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